Axa Investment Managers (Axa IM) has devised corporate bond strategies aimed at providing assistance to Australian superannuation funds when dealing with MySuper requirements.
The strategies, which the company has labelled its SmartBeta credit strategies, will allow super funds to achieve low-cost global credit exposure without the drawbacks of market-capitalisation index-based strategies.
The idea for the new strategy stems from a white paper on investing in credit and the future of index tracking, authored by Axa IM global head of consultant relations Tim Gardener.
“In the decade of uncertainty which faces us, we at Axa IM think there are real dangers in blindly tracking indices. The winning strategies are either good long-term active management or smart strategies,” Gardener said.
“Index tracking (irrespective of the index) assumes implicitly that change, if it occurs, will be gradual. This is not an assumption on which today’s investors should choose to base an investment strategy.”
As of July 2013, changes to Australia’s superannuation system will require super funds to offer a no-frills default balanced fund option through a MySuper product.
Axa IM director of Australia and New Zealand Craig Hurt said “low cost constraints” could lead to an industry-wide overreliance on standard index funds, prompting well-known problems associated with market-capitalisation indices to arise.
“We believe that our SmartBeta solutions will enable local investors to achieve both the low costs they are seeking while simultaneously resolving the market-capitalisation issues,” Hurt said.
Under the strategy, the diversified portfolio was constructed so it was not unduly exposed to either systemic or event risk at an issuer, sector or country level, the company said.
In addition to the SmartBeta credit strategies, Axa IM is also considering launching global equities and global aggregate strategies.
The offer, which is expected in the coming months, aimed to give super funds a more diverse range of “intelligent low-cost” MySuper-compliant pooled fund options, the company said.
“SmartBeta offers a middle ground for those looking to harvest the return of the market whilst still avoiding the inefficiencies of a purely passive approach,” Hurt said.
“It is a strategy that is designed with the aim of protecting portfolios from both systemic and event risk and to deliver a less volatile return.”
